Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 3, Problem 5IAPA
To determine
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Foundations of Economics (8th Edition)
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- Consider an economy with two producers, Sidney and Connor. Each allocates 8 hours per day between the production of chocolate and bananas. Given 8 hours of labour, Sidney can produce 80kg of chocolate or 16kg of bananas. Connor can produce either 2kg of chocolate or 4kg of bananas per hour. A) No Trade i) In separate diagrams, show the production possibilities frontier for both Sidney and Connor. Put bananas on the horizontal axis and chocolate on the vertical axis. ii)What is the opportunity cost of bananas for both Sidney and Connor if there is no trade?arrow_forwardSuppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce. Why shouldn't the nation produce 1 gun and 2 butters?arrow_forwardConsider two neighboring island countries called Arcadia and Euphoria. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Country Arcadia Euphoria Rye (Bushels per hour of labor) 8 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Arcadia uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Euphoria uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Arcadia produces 8 million bushels of rye and 48 million pairs of jeans, and Euphoria produces 15 million bushels of rye and 20 million pairs of jeans. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of rye and jeans it produces. of jeans, and…arrow_forward
- The following table shows the amount of good A and good B that two countries could produce if they devoted all their resources to that good. Assume both countries have the same quantity of resources and the trade-off between good A and good B remains constant as resources are shifted from one good to another. Answer the questions below and show calculations where appropriate. Canada India Good A 600 500 Good B 950 1200 What is India’s marginal opportunity cost of producing good A? Good B? Based on the data given, what is the terms of trade range for good A in terms of units of good B?arrow_forwardFor the question below use the following figures which illustrate the production possibilities available to a farmer and a rancher with 12 hours of labour. Given the information in the table below the table below Labour hours needed to make one pound of: Farmer Rancher Meat 10 5 Potatoes 4 1 For the rancher, the opportunity cost of one pound of meat is Select one: 5 pounds of meat 1 pound of meat 0.2 pound of potatoes 5 pounds of potatoesarrow_forwardSuppose two nations, Beta and Gamma, each make aircraft and corn. The main resource in each nation is hours of "labor". Production occurs in each nation according to the following table. With one hour, a worker in each nation can produce the following: Table showing Aircraft and Corn produced per hour Aircraft Corn Beta 1 per hour 500 per hour Gamma 2 per hour 300 per hour What is the opportunity cost of each good (in terms of the other good) for each nation? Try creating a small table of the opportunity costs such as this: Beta: 1 aircraft = _______ corn 1 corn = _______ aircraft Gamma: 1 aircraft = _______ corn 1 corn = _______ aircraft Which nation has the Absolute Advantage in aircraft? Which nation has the Absolute Advantage in corn? Which nation has the Comparative Advantage in aircraft? Which nation has the Comparative Advantage in corn? If these two nations trade, what good should each specialize in and export to the other? What…arrow_forward
- Why is it inefficient for an economy to be inside the production possibilities frontier?arrow_forwardCorn 120.000 D 80.000 40.000 Robots 5.000 10.000 15.000 In the graph above, if the economy is at point C, it follows thatarrow_forwardConsider a simple economy which produces two goods; pizzas and tractors. Using the production possibilities boundary and graphs for the pizza and tractor market show and explain how the precise allocatively and productively efficient point on the production possibilities boundary can be determined. Please draw a graph to show, not just write step by step.arrow_forward
- Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. Country Yosemite Sequoia Pistachios (Pounds per hour of labor) 8 5 Chinos (Pairs per hour of labor) 16 20 Suppose that initially Yosemite uses 1 million hours of labor per day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of labor per day to produce pistachios and 1 million hours per day to produce chinos. As a result, Yosemite produces 8 million pounds of pistachios and 48 million pairs of chinos, and Sequoia produces 15 million pounds of pistachios and 20 million pairs of chinos. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each…arrow_forwardQ3. Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. a. Draw Home's production possibility frontier. Label the curve PPF. (Clearly show the maximum amount of the two goods that can be produced on your graph) b. What is the opportunity cost of apples in terms of bananas? (Enter your response rounded to one decimal place.) c. In the absence of trade, what would the price of apples in terms of bananas be? There is now also another country, Foreign, with a labor force (L) of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. d. Derive the equation for Foreign's production possibility frontier. e. Graph Foreign’s production possibility frontier.arrow_forwardHow could a society manage to end up consuming a bundle of goods that is beyond its production possibility frontier？ And, in doing so, how does it shift what it produces? Please include a graph that helps to illustrate your answer.arrow_forward
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